Dairy Subsidy

JEFFREY SIMPSON

Canada’s a double-dealer in world trade

JEFFREY SIMPSON

The Globe and Mail

Published Tuesday, Apr. 20 2010, 4:35 PM EDT

Suppose you were a member of the Canadian Widget Makers Union. Your company tried to export widgets to Country X but couldn’t penetrate the market because of a 241-per-cent tariff. Chances are, you, the company and the CWMU would scream blue murder at the blatant protectionism.

Or suppose you were a wheat farmer. You want to export to Country Y but discovered that your product faced a 292-per-cent tariff, effectively shutting you out of the market.

It sounds implausible, even crazy, that anything like this could happen in today’s world of trade agreements. But it does happen, right here in good old Canada. Welcome to supply management.
If you think stratospheric is too strong a word, consider these tariff levels for imports above the small allowed quota

Last month, eight Pacific countries gathered in Melbourne to begin negotiations toward what they believe could become a free-trade deal among them. They hope that such a deal could spread to other Asian countries, that continent being the world’s fastest growing area.

Canada, belatedly, wanted to be at the Melbourne table. Instead, we were told we weren’t welcome, except as observers.

The rebuff came from some of our closest friends – the United States, Australia and New Zealand. They wanted participants who are serious about free trade. They knew that Canada wouldn’t be serious, because Canadian participants would be obliged to exclude supply-managed agricultural products, just as Canada has done in every trade agreement.

Canada, as the world knows, is a double-dealer in world trade. We talk a great game, and work hard to create free or freer trade in some areas, because liberalized trade greatly benefits a country so dependent on exports.

Then Canada turns around and defends to the upmost supply-managed products with tiny import quotas and stratospheric tariffs on anything above those tiny quotas.

If you think stratospheric is too strong a word, consider these tariff levels for imports above the small allowed quota: chicken, 238 per cent to 253 per cent; turkey, 154 per cent to 169 per cent; fluid milk, 241 per cent; cream, 292 per cent; yogurt, 237 per cent; buttermilk, 268 per cent; butter, 298 per cent to 313 per cent; cheese, 245 per cent; ice cream, 277 per cent; eggs, 163 per cent.

Think these are high? They were even higher before the mid-1990s, when Canada was forced to cut tariffs by 36 per cent. What did we do? We placed higher-than-stratospheric tariffs on supply-managed goods, then reduced them by 36 per cent to today’s level.

Here’s another part of the supply-management racket. Quotas for imported eggs, cheese, cream and chicken haven’t been raised since the mid-1990s, despite population and economic growth. Domestic supply-managed farmers, operating behind these tiny, static import quotas and huge tariffs on anything above the quota, have scooped up the new market, while raising domestic prices since they face no competition.

Supply-management lobby groups pat themselves on the back, saying their system doesn’t cost the taxpayer a nickel. This is absolutely true – and deeply misleading. Taxpayers don’t subsidize these farmers through the government, but they do as consumers with every purchase of these products, which are also used in many processed foods.

Low-income consumers are hurt the worst, because they pay a larger share of their limited household budgets on food than wealthier citizens. You would expect the New Democrats, self-appointed champions of low-income people, to be up in arms about this racket, except that their friends in the union movement and think tanks such as the Canadian Centre for Policy Alternatives never saw a liberalized trade agreement they liked.

The NDP, therefore, joins the other parties in pledging undying fealty to supply-managed farmers. Just before the last round of world trade negotiations, the House of Commons, whose members can seldom agree on the day of the week, unanimously passed a resolution instructing Canadian negotiators to defend supply management to their dying breath.

Australia and New Zealand, two of the countries that rebuffed Canada, used to have huge protection programs for dairy farmers. New Zealand swept away all subsidies in 1984 – and is now the world’s largest exporter of dairy products! Australia got rid of its subsidies by buying out farmers courtesy of a tax on milk that paid for the rationalization of the industry.

In Canada, the power of the Quebec and Ontario supply-managed farm groups frightens and paralyzes federal governments of whatever political stripe. The farmers compose the music. They write the libretto. Politicians sing what is put in front of them.